tv Nightly Business Report PBS March 30, 2011 7:00pm-7:30pm PDT
>> susie: prices at the pump continue to surge, with the national average above $3.50 a gallon. it's a long-term problem the president wants to fix. >> we can't rush to propose action when gas prices are high, and then hit the snooze button when they fall again. >> tom: he's renewing his call for a big cut in oil imports over the next decade. you're watching "nightly business report" for wednesday, march 30. this is "nightly business report" with susie gharib and tom hudson.
captioning sponsored by wpbt >> tom: good evening. susie gharib is off tonight. i'm joined by suzanne pratt. as gasoline prices push closer to $4 a gallon, suzanne, president obama today renewed his call for a greater focus on u.s. energy independence. >> susie: tom, the president says it's time to "get serious about a long-term policy for secure affordable energy." >> tom: the president issued his blueprint for a secure energy future. it calls for cutting the nation's oil imports by one third by 2025. >> we're going to have to find ways to boost our efficiency so we use less oil. we've got to discover and produce cleaner, renewable
sources of energy that also produce less carbon pollution, which is threatening our climate. and we've got to do it quickly. >> tom: the response from the oil industry has been varied. conoco phillips said it was encouraged by the president's call for more domestic oil production, but that it wants to see more specifics. while the former president of shell oil, john hofmeister, says the president's energy plan sounded more like a campaign speech. >> i heard politics as usual, because if there was a seriousness about it, if there was an intent to move forward, i think there would be more than rhetoric. there would be specifics around what would happen this calendar year, next calendar year, the following calendar year-- and none of that was in the remarks.
>> tom: for every us barrel, america impotrs two foreign one.s >> susie: the president wants to see a million electric vehicles cruising our highways within the next five years. those plug-ins could help reduce our reliance on crude oil, but they could also stress the nation's power grid. austin, texas, is one the first u.s. cities to get electric cars, but as diane eastabrook reports, austin is making sure it can keep the lights on while still charging its cars. >> reporter: mike legatt recently traded in a hybrid for an electric plug-in. the austin, texas psychologist is excited about his new chevy volt, but he also knows the new technology could put pressure on the power grid. >> i hope that one of the things that will happen as part of the electrification of fleet vehicles and general driving... is that as we move into that world, people are going to become more aware of the electricity around them in keeping the grid up and reliable. >> reporter: experts say the first adopters of electric vehicles are very likely to have
similar socioeconomic backgrounds, and they may even live in the same neighborhoods. and, if all of those people plug in their cars at the same time every day, that could put stress on the area's power grid. >> onesies and twosies-- a car here, a car there-- the grid is certainly big enough to handle it. >> reporter: karl rabago is vice president of distributed energy services for austin energy. the utility provides power directly to homes and businesses. rabago says peak hours are the biggest potential problem. >> well, what if half a dozen people add electric vehicles and follow that same stereotypical charging pattern-- say between 6:00 p.m. and 10:00 p.m. when they come home from work-- then that neighborhood feeder might need a bigger transformer than a similar feeder two streets away that doesn't have those vehicles. >> reporter: the electric reliability council of texas, or ercot, manages the flow of power
across most of texas. this is its command center just north of austin. >> what we're looking at is 37,250 megawatts of load on the ercot system. our peak is 65,000 megawatts. paul wattles is ercot's supervisor of demand response. he thinks the texas grid has enough capacity to handle additional loads from electric vehicles well into the future. still, he wants utilities to provide incentives to e.v. owners to charge smart. >> in other words, cheaper power off-peak would be great. there may also be services that these customers could enroll in that would allow either their retailer or an aggregator, perhaps, to shut the load off if we had a grid emergency. >> reporter: argonne national laboratory near chicago has been studying plug-ins for the department of energy. don hillebrand heads its center for transportation research. he says while the texas grid might be able to handle a crush of e.v.s, other areas might not. >> regions vary, and it depends on what region you're in. some have more capacity than
they need. some are right to the ragged edge. and if you're going to raise right up to that ragged edge and not plan on building new power plants, you're going to deal with brownouts. >> reporter: austin energy is giving rebates on the installation of home chargers to customers who let it monitor their charging patterns, giving the utility a leg up on potential overloads. and that could keep electric cars cruising the roads and keep the lights on in austin. diane eastabrook, "nightly business report," austin, texas. >> tom: here are the stories in tonight's n.b.r. newswheel: optimism about jobs helped stocks move higher. the dow rose 71 points, the nasdaq added nearly 20 and the s&p 500 was up eight. trading volume remained light. 918 million shares moving on the big board, 1.8 billion on the nasdaq. payroll processor a.d.p. says the nation's private payrolls posted solid gains this month, adding 201,000 jobs. the a.d.p. survey just looks at businesses, while the labor department numbers out friday include government workers.
the nation's massive bank bailout is starting to turn a profit. the troubled asset relief program, or tarp, is now $6 billion in the black, and that treasury could ultimately earn as much as $20 billion. treasury spent $432 billion bailing out banks, u.s. automakers and insurer a.i.g. still ahead, with the president focusing on energy independence, hilary kramer's looking at nat gas plays. she's tonight's "street critique" guest. >> susie: your home may be your biggest investment, and it's critical to the economy, but the housing market remains in the basement. prices are down, and the so- called shadow inventory of homes close to foreclosure remains high. so what does the future hold for residential real estate? washington bureau chief darren gersh talked with shaun donovan, secretary of housing and urban development. darren began by asking donovan if the housing market is facing a double dip. >> there's though question that we've had some
discurrenting numbness the last couple weeks on sales. i think a couple things we should remember here. first of all, the most important thing we can do to get housing in a full recovery is to get the economy back on track and to create jobs. so all that we've done to focus on jobs, to create new jobs, the million and a half new jobs that have been created over the last year is critical as a foundation. beyond that, we have to get the number of foreclosures down. we actually have made significant progress there. foreclosures, people entering foreclosures are down 30 to 40% over where they were a year ago. and one of the things we believe strongly is that we have to clear the uncertainty in the housing market, and that's why the discussions that we've been having to try to settle all of the problems that we saw with the servicers, so-called robo signing, false affidavits, but deeper
problems that we saw have to be cleared up. >> those talks are taking place just a few blocks from here. so first of all what do you expect from those talks today? >> well, what i expect is that we're going to be working closely with the state attorneys general to hold these servicesers accountable. there is no question that there were serious mistakes made. we've seen effort to keep people out of foreclosure have helped hundreds of thousands of families, but not as many as we would have liked and a lot of this as the result of poor servicing practices. >> reporter: the issue in these takes us that when you go in and say i want to modify hi form, they stay we'll work with you, but we're going to keep the clock ticking on the foreclosure, it's called dual track. so if you don't get a modification your foreclosure is pretty close. will the talks end as dual track systems, so it will go, if you go in to talks about
modification and it doesn't work out, then the foreclosure clock -- >> that is absolutely one of the issues that we're focused on. not the only issue. we've seen many other practices, frankly, that are outrageous. and -- >> reporter: like what? >> we've seen not only examples of foreclosures hatching without a signature, without the right documents, but what i'm particularly focused on is early on in the process when somebody gets behind by 0 or 60 days, but it's somebody who may have lost a job temporarily, may have lost income, that's somebody who can continue to be a successful homeowner. and yet not only did that person not get help, they think they're going to get help, they submit paperwork, that paperwork is lost. those kinds of steps hurt everyone. so we have to fix that process. >> reporter: in the talks, one of the issues is how you handle second loans.
not the first mortgage, but a second mortgage, home equity loan. how will the talks address that? >> well, we're clearly looking at the ability to reduce some of those mortgages. part of the problem with the second liens is that they stand in the way of being able to resolve the first mortgage as well. and we think that if we can reduce some of those, allow people to stay in their homes, allow resolution of their first mortgages, that will help significantly. >> suzanne: you can watch more of our interview with hud secretary donovan on the web. just go to nbr on pbs.org and hear donovan's response to critics of the obama administration's home mortgage modification program. a little later in the program, we'll look at the surprising comeback of adjustable rate mortgages.
>> suzanne: some damage control tonight from berkshire hathaway c.e.o. war en buffet. he took the unusual step of writing a news release on the resignation of david sokol, chairman of the subsidiaries. he was the matchmaker for berkshire's purchase this month of a company, turned out sokol bought a chunk of the stock back in january. buffet made it clear he didn't think the purchase was illegal, but he has expected sokol's decision to resign to spend more time -- he was seen as a possible successor to buffet.
>> tom: >> tom: the buying interest continues with the major stock indices extending their gains. let's take a look at tonight's "market focus." with just one more day left in the first quarter, we figured we would start with the s&p 500 so far this year-- up more than 5.5%. while the s&p 500 has yet to break out to new post-recession highs, check out this exchange- traded fund that follows the russell 2000 stock index. today's gains of 1.3% take it to a new 52-week high, up more than 30% from a year ago. and its close to making a new all-time high. this is the past five years, showing the big fall during the financial collapse, and tonight it is just below its all time high.
for the third session in a row, telecom stocks led the broad market. at&t jumped another 2%. in the past two weeks, it's up 12% and has been hitting new 52- week highs as investors bet on its buyout of t-mobile. the deal-making isn't confined to telecom. cephalon shares rocketed higher by a nice 28%. look at this big strong move. volume exploded by 27-fold. it's the target of a hostile buyout bid by a canadian drug maker. valeant is offering $73 per share, or $5.7 billion. as we saw, cephalon stock closed above that price today. valeant also will launch an effort to replace cephalon's board in its push for a deal. clearly one to watch. the market likes the linkup. a valeant shares rallied almost 13%, nice move here, up to their
highest price since valeant completed its buyout of biovail last september. now a couple of other drug stocks saw buying. endo pharma concentrates on pain medicine. shares jumped more than 9%. medicis makes dermatological medicine. its stock was up more than 4%. volume was heavy for both of them. while we're talking about the drug business, k.v. pharmaceuticals lost a fifth of its value today. down better than 20%. look at this move down. this is how the stock has traded since the first of the year. the food and drug administration won't go after pharmacies that create a cheaper versions of a treatment preventing pre-term labor for certain pregnant women. that k.v. pharmaceuticals makes. cloud computing firm rackspace is stretching skyward, up 8% on strong volume. it has a deal with dell and equinix to develop an open- source cloud computing platform. with this rally, there it is, shares sit at a new 52-week
high. tomorrow night, we are scheduled to speak with the rackspace c.e.o. be sure to join us. and that's tonight's "market focus." >> suzanne: in his energy speech today, president obama acknowledged the u.s. depends on nuclear energy. but, he also said he's determined to ensure it's safe. that pledge comes as the world watches japan struggle to control a damaged nuclear power plant. lucy craft has the latest from tokyo. >> reporter: executives of tokyo electric power-- or "tepco"-- did the customary bow of remorse, apologizing for a disaster that shows no signs of abating. their president, conspicuously absent from public view for several weeks, has checked into the hospital, complaining of high blood pressure. the latest alarming news from tepco? radioactive iodine in seawater near the fukushima plant has surged to 3,355 times legal limits. officials continue to argue seawater contamination won't ruin japanese fisheries, but these assurances are cold comfort to the agriculture and marine industries, which have lost consumer confidence here and abroad.
meanwhile, tepco dropped another bombshell today. businesses are being asked to slash their energy use by a whopping 25%, or tokyo could face a long, hot summer of blackouts. lucy craft, "nightly business report," tokyo. >> tom: as we reported earlier, part of president obama's latest energy plan is focused on expanding the use of natural gas. that has tonight's "street critique" guest drilling for stock ideas. she's hilary kramer, editor of gamechangerstocks.com.
nice to see you. your focus is using nat gas to power vehicles. the choice here is clean energy fuels, and interesting choice because the share price was up big today on the heels of the president's talk. what price are you buying clne? >> well, clne i've been watching, it more of a target price, that would be $20 a share. the stock is only down 11, but now that it looks like legislation could come through that backs natural powered gas vehicle, which is first on the list of priorities, i could see clean energy getting up there. >> tom: so you'd like to buy shares at $20? >> i would like to buy shares up to $20. right now i do not own clean energy. but it an important play, and williams, wnb, also ways to play natural gas powered vehicles. >> tom: back to one of your earliest picks before the holiday season last year, bonita sent us its comment, please update your opinion on
zales, itas dropped recently. it was trading at 3.05 per share, still up nicely despite well off the high that we saw in aupgs of strong holiday sales. >> zales has come back nicely, it was trading down ironically in sim 'they with tiffany's which was doing poorly because of the japanese situation because so much of the revenue comes from japan. we should see zales come back next earnings will be very important for us and i'm still holding on to my zales shares, and i see some up side there in that middle market retail jewelry retailer. >> tom: are you adding to that position in sales at all? >> i won't add to the position, but we're up from where i originally brought is in, but it's been a wild ride.
>> these are industrial products, this is piped in, piping for water, for natural gas. for oil. a lot of infrastructure rebuilding that has to take place, also big farm equipment. so kubota is an important company for japan and the rebuilding process, and generally i am staying away from japanese stocks. but this would be the best of the worst. >> tom: i know generally you like smaller companies. do you own shares of kub? >> no, i don't and i'm staying a way from japan for now. >> tom: and out of the three we mentioned you own zales? >> yes, i loan zales and clean energy. i'm looking to get into it, we'll see how the legislation goes. >> tom: you can e-mail us at nbr.com. send us a note by twitter.
>> suzanne: here's what we're watching for tomorrow: factory orders for february, and we talk cloud computing. we'll find out why it's so popular when we're joined by lanhan napier, c.e.o. of rackspace holdings. and sam stovall, chief investment strategist of standard & poor's, joins us to wrap up the first quarter and look ahead. >> suzanne: look for google to start a new privacy program as part of a settlement with the federal trade commission. the web search giant was accused of deceiving users when it launched its social networking service called "buzz" last year. some customers complained when their email contacts were automatically made public. google apologized for the glitch and said it will now get people's consent before sharing information with third parties. >> tom: car-sharing company zipcar has unveiled the terms of its initial public offering. it expects shares to price between $14 and $16 each. the company, which is popular in large cities and on college campuses, could raise as much as $133 million.
rate on a 30-year fixed mortgage is up more than 1%. so, many homebuyers are taking another look at adjustable rate mortgages, or "arms." those products get part of the blame for the housing market's collapse, but for some homebuyers arms still make sense. erika miller looks at whether you should consider one. >> reporter: beta fang is excited to move in to her new apartment. the movers have arrived and are unloading her belongings. she bought a studio in this manhattan building with her boyfriend, and hopes to live there forever. but instead of taking out a traditional, 30-year, fixed-rate mortgage, they opted for a seven-year adjustable. >> it's about $300 a month savings. >> reporter: that's a lot. >> yes. and right now, our career just took off, so probably seven years down the road, our income will probably become much better... hopefully. >> reporter: peter grabel helped them get the mortgage, and says many of his clients are opting for arms over fixed-rate loans.
>> the average mortgage in this country is paid off in less than seven years. so, for whatever reason, most people don't stay in the mortgage longer than that. so if you have a arm for seven years and your rate is lower, you are ahead of the game. >> reporter: in 2005, near the height of the real estate boom, adjustable rate mortgages were almost 40% of all home loans. as housing went south, that number fell to about 2% in 2009. freddie mac predicts arms will be about 7% of mortgages this year. before you take out an adjustable rate loan, it's important to understand the drawbacks. fixed-rate mortgages have equal payments over the life of the loan. arms, on the other hand, typically offer a teaser rate for a set period of time and then adjust annually. there's been one big change since the real estate bust: it's much harder to qualify for an arm now. before, buyers didn't always have to document income. mortgage strategist mahesh swaminathan says that change will help the housing recovery.
>> income has to be verified and documented and so forth. all these are positive things, in the long run, to create a sustainable housing market. but for borrowers like beta fang, the reward of an adjustable loan is worth the risk. what she's saving will go toward fixing up her place. >> we want to put up a wall so that it becomes a real one- bedroom, and maybe buy some nice furniture. >> reporter: furniture so she can sit and stare at her beautiful central park view. erika miller, "nightly business report," new york. >> suzanne: that's "nightly business report" for wednesday, march 30. i'm suzanne pratt. good night everyone, and good night to you too, tom. >> tom: good night suzanne. i'm tom hudson. good night everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: